Domestic Capital's Share Rises in India's Private Credit Market: EY Report

India's private credit market is undergoing a significant transformation, marked by a growing share of domestic capital, according to a recent report by EY India. The overall private credit investments in the country were comparable to the levels observed in the second half of 2025, reaching approximately $3.4 billion, which translates to about ₹28,220 crore at an exchange rate of ₹83 per US dollar.

Vishal Bansal, Partner for Debt and Special Situations at EY India, highlighted this shift, stating, "The growing share of domestic capital is one of the most significant developments in India's private credit market." This indicates a maturing financial ecosystem where Indian investors and institutions are increasingly contributing to the country's credit landscape.

What is Private Credit?

Private credit refers to loans provided by non-bank lenders directly to companies, often bypassing traditional banking channels. These loans can be tailored to the specific needs of businesses and typically involve institutional investors or specialized funds. It serves as an alternative source of financing, especially for medium-sized businesses or those with unique funding requirements that traditional banks might not cater to.

Key Drivers of Market Activity

The report identified several key drivers behind the robust activity in the private credit market. These include:

• Refinancing: Companies opting to restructure or replace existing debt with new private credit facilities.
• Holding-company funding: Financing provided to parent companies for various corporate purposes.
• Acquisition financing: Funds raised to facilitate mergers and acquisitions, supporting corporate expansion and consolidation.

These drivers suggest that Indian businesses are actively seeking flexible and timely funding solutions, and the private credit market is effectively meeting this demand.

Significance of Domestic Capital

The increasing involvement of domestic Indian capital in the private credit market is a crucial development. Historically, much of the private credit in emerging markets like India has come from international funds. A larger share from local funds signifies several positives:

• Reduced Reliance on Foreign Capital: It makes the Indian market less susceptible to global capital flows and foreign exchange rate fluctuations.
• Stronger Local Financial Ecosystem: It builds deeper capabilities within India's financial sector to assess, manage, and provide complex credit solutions.
• Alignment with Local Needs: Domestic lenders might have a better understanding of the local market dynamics, regulatory environment, and specific needs of Indian businesses.

Impact on Indian Businesses and Economy

For Indian businesses, especially those that may not fit conventional bank lending criteria, the rise of domestic private credit offers expanded access to capital. This can fuel growth, innovation, and job creation. For the broader economy, a diversified and robust credit market, supported by local capital, enhances financial stability and resilience. It ensures that critical funding is available to sustain economic activity and development, even during periods of global uncertainty.

The trend highlighted by the EY report underscores India's evolving financial landscape, where alternative financing channels are gaining prominence, backed by a growing pool of local investors.

This report is for informational purposes only and should not be considered financial or investment advice.